How Will Bankruptcy Affect Your Credit Rating?

Interviewer: Speaking of that, how does filing bankruptcy affect your credit and for how long?

Vance: Your credit does take a hit, but most of the people that have come in are late on their credit card payments or they've had judgments against them or their home's in foreclosure. Their credit rating has already been affected.

Most People Recover from a Bankruptcy within 2 to 3 Years

The national average as far as recovery from a bankruptcy is two to three years. I have clients that file Chapter 7 bankruptcy, and within two years, they're buying new homes. You do recover.

Everybody does. I had a client that came up to me from out at a restaurant not long ago. He had been out of bankruptcy a little over two years, and he said, "Look, my credit score's up to 750. I've just bought a new house. I've just bought a new car." He said, "This is the best thing I've ever done."

Will Filing for Bankruptcy Affect a Background Check Conducted by a Prospective Employer?

Interviewer: A lot of places nowadays check your credit when you even go to apply for a job. Does filing bankruptcy affect your ability to do that?

Vance: I've never had anybody come back and say that they didn't get a job because they filed bankruptcy. I had a client that worked for TSA, the security people at the airport, and that was one of his questions when he came in. He said, "Look, I'm up for a promotion I know next year. How will this affect me?"

I said, "Look, an employer would probably prefer you to be out of this stressful debt than being overwhelmed with debt." He came back a year later, and he said, "Look, I got my promotion. It didn't even come up." His security clearance is very high, so it didn't affect him at all.